OFFICE OF INSPECTOR GENERAL for the Millennium Challenge Corporation _part5 pot

Our consideration of internal control was for the limited purpose described in the preceding
paragraph and would not necessarily identify all deficiencies in internal control that might be
significant deficiencies or material weaknesses. A material weakness is a significant deficiency, or
combination of significant deficiencies, that results in more than a remote likelihood that a material
misstatement of the fund accountability statement will not be prevented or detected by the entity’s
internal control. We did not identify any deficiencies in internal control that we consider to be
material weaknesses, as defined above.
However, we noted certain matters involving internal control and its operation that we have reported
to the management of (name of recipient) in a separate letter dated August 15, 20XX.
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This report is intended for the information of (name of recipient) and the Millennium Challenge
Corporation (MCC). However, upon release by MCC, this report is a matter of public record and its
distribution is not limited.
Audit Firm's Signature
Date
Exclude this paragraph if there are no nonreportable conditions.
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Example 7.2.B - Illustrative Auditor's Report on Internal Control with Reportable Conditions
Noted
Independent Auditor's Report on Internal Control
Board of Directors
Name of Recipient Organization
Complete Mailing Address
We have audited the fund accountability statement of (name of recipient) as of and for the year
ended June 30, 20XX, and have issued our report on it dated August 15, 20XX. We also reviewed
the separate cost-sharing schedule (if applicable).
We conducted our audit in accordance with U.S. Government Auditing Standards issued by the

Comptroller General of the United States. Those standards require that we plan and perform the
audit to obtain reasonable assurance about whether the fund accountability statement is free of
material misstatement.
The management or those charged with governance of (name of recipient) is responsible for
establishing and maintaining internal control. In fulfilling this responsibility, estimates and
judgments by management are required to assess the expected benefits and related costs of internal
control policies and procedures. The objectives of internal control are to provide management with
reasonable, but not absolute, assurance that the assets are safeguarded against loss from
unauthorized use or disposition; transactions are executed in accordance with management's
authorization and in accordance with the terms of the agreements; and transactions are recorded
properly to permit the preparation of the fund accountability statement in conformity with the basis
of accounting described in Note X to the fund accountability statement. Because of inherent
limitations in internal control, errors or fraud may nevertheless occur and not be detected. Also,
projection of any evaluation of the structure to future periods is subject to the risk that procedures
may become inadequate because of changes in conditions or that the effectiveness of the design and
operation of policies and procedures may deteriorate.
In planning and performing our audit of the fund accountability statement of (name of recipient) for
the year ended June 30, 20XX, in accordance with U.S. Government Auditing Standards, we
considered (name of recipient) internal control over financial reporting (internal control) as a basis
for designing our auditing procedures for the purpose of expressing our opinion on the fund
accountability statement, but not for the purpose of expressing an opinion on the effectiveness of the
entity’s internal control. Accordingly, we do not express an opinion on the effectiveness of the
entity’s internal control.
Our consideration of internal control was for the limited purpose described in the preceding
paragraph and would not necessarily identify all deficiencies in internal control that might be
significant deficiencies or material weaknesses. However, as discussed below, we identified certain
deficiencies in internal control that we consider to be significant deficiencies [and other deficiencies
that we consider to be material weaknesses
].
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A control deficiency exists when the design or operation of a control does not allow management or
employees, in the normal course of performing their assigned functions, to prevent or detect
misstatements on a timely basis. A significant deficiency is a control deficiency, or combination of
control deficiencies, that adversely affects the entity’s ability to initiate, authorize, record, process,
or report financial data reliably such that there is more than a remote likelihood that a misstatement
of the entity’s fund accountability statement (and cost-sharing schedule, if applicable) that is more
than inconsequential will not be prevented or detected by the entity’s internal control. We consider
the following deficiencies to be significant deficiencies in internal control: (Include paragraphs
summarizing the significant deficiencies, with references to the attached findings, which should
fully describe the conditions noted.)
A material weakness is a significant deficiency, or combination of significant deficiencies, that
results in more than a remote likelihood that a material misstatement of the fund accountability
statement will not be prevented or detected by the entity’s internal control. We did not identify any
deficiencies in internal control that we consider to be material weaknesses, as defined above.
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We also noted other matters involving internal control and its operation that we have reported to the
management of (name of recipient) in a separate letter dated August 15, 20XX.
33
This report is intended for the information of (name of recipient) and the Millennium Challenge
Corporation (MCC). However, upon release by MCC, this report is a matter of public record and its
distribution is not limited.
Audit Firm's Signature
Date
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If conditions believed to be material weaknesses are disclosed, the report must describe the weaknesses that have
come to the auditor’s attention. The last sentence of this paragraph should be modified as follows:
“We believe that the following deficiencies constitute material weaknesses.

(A description of the material weaknesses that have come to the auditor’s attention would follow and must be cross-
referenced to the attached findings.)
33
Exclude this paragraph if there are no other matters involving internal control that should be reported.
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Example 7.3.A - Illustrative Auditor's Report on Compliance with No Material
Noncompliance Noted
Independent Auditor's Report on Compliance
Board of Directors
Name of Recipient Organization
Complete Mailing Address
We have audited the fund accountability statement of (name of recipient) as of and for the year
ended June 30, 20XX, and have issued our report on it dated August 15, 20XX. We also reviewed
the separate cost-sharing schedule (if applicable).
We conducted our audit in accordance with U.S. Government Auditing Standards issued by the
Comptroller General of the United States. *Those standards require that we plan and perform the
audit to obtain reasonable assurance about whether the fund accountability statement is free of
material misstatement resulting from violations of agreement terms and laws and regulations that
have a direct and material effect on the determination of the fund accountability statement
amounts.
34
Compliance with agreement terms and laws and regulations applicable to (name of recipient) is the
responsibility of (name of recipient)'s management. As part of obtaining reasonable assurance
about whether the fund accountability statement is free of material misstatement, we performed tests
of (name of recipient)'s compliance with certain provisions of agreement terms and laws and
regulations. However, our objective was not to provide an opinion on overall compliance with such
provisions. Accordingly, we do not express such an opinion. We also performed tests of (name of

recipient)'s compliance with certain provisions of agreement terms and laws and regulations
applicable to the provision of cost-sharing contributions (if applicable).
The results of our tests disclosed no instances of noncompliance that are required to be reported here
under U.S. Government Auditing Standards.
35
We noted certain immaterial instances of noncompliance that we have reported to the management
of (name of recipient) in a separate letter dated August 15, 20XX.
36
34
The lack of a satisfactory continuing education program and/or external quality control review program must be
disclosed in the second paragraph as follows:
“Except for not having a fully satisfactory continuing education program and/or not conducting an external quality
control review by an unaffiliated audit organization (as described in our report on the fund accountability statement),
we conducted our audit in accordance with U.S. Government Auditing Standards issued by the Comptroller General of
the United States ” (continue with the standard language of this paragraph).
35
See U.S. Government Auditing Standards, Chapter 5, paragraphs 5.18 - 5.25 for reporting criteria.
36
Exclude this paragraph if there are no immaterial instances of noncompliance.
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This report is intended for the information of (name of recipient) and the Millennium Challenge
Corporation (MCC). However, upon release MCC, this report is a matter of public record and its
distribution is not limited.
Audit Firm's Signature
Date
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Example 7.3.B - Illustrative Auditor's Report on Compliance with Material Noncompliance
Noted
Independent Auditor's Report on Compliance
Board of Directors
Name of Recipient Organization
Complete Mailing Address
We have audited the fund accountability statement of (name of recipient) as of and for the year
ended June 30, 20XX and have issued our report on it dated August 15, 20XX. We also reviewed
the separate cost-sharing schedule (if applicable).
We conducted our audit in accordance with U.S. Government Auditing Standards issued by the
Comptroller General of the United States. *Those standards require that we plan and perform the
audit to obtain reasonable assurance about whether the fund accountability statement is free of
material misstatement resulting from violations of agreement terms and laws and regulations that
have a direct and material effect on the determination of the fund accountability statement
amounts.
Compliance with the terms and conditions of the Compact and related Agreements and laws and
regulations applicable to (name of recipient) is the responsibility of (name of recipient)'s
management. As part of obtaining reasonable assurance about whether the fund accountability
statement is free of material misstatement, we performed tests of (name of recipient)'s compliance
with certain provisions of agreement terms and laws and regulations. However, our objective was
not to provide an opinion on overall compliance with such provisions. Accordingly, we do not
express such an opinion. We also performed tests of (name of recipient)'s compliance with certain
provisions of agreement terms and laws and regulations applicable to the provision of cost-sharing
contributions (if applicable).
Material instances of noncompliance are failures to follow requirements or violations of agreement
terms and laws and regulations that cause us to conclude that the aggregation of misstatements
resulting from those failures or violations is material to the fund accountability statement and the
cost-sharing schedule (if applicable). The results of our compliance tests disclosed the following

material instances of noncompliance, the effects of which are shown as questioned costs in (name of
recipient)'s 20XX fund accountability statement and cost-sharing schedule (if applicable).
(Include paragraphs summarizing the material instances of noncompliance, with references to the
attached findings, which must fully describe the material instances of noncompliance.)
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U.S. Government Auditing Standards state that audit findings have been regarded as containing the elements of
condition, criteria, cause, and effect. The auditors must attempt to identify these points to provide sufficient
information to permit timely and proper corrective action. These findings may also serve as a basis for conducting
additional audit work.
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We considered these material instances of noncompliance in forming our opinion on whether (name
of recipient)'s 20XX fund accountability statement is presented fairly, in all material respects, in
accordance with the terms of the agreements and in conformity with the basis of accounting
described in Note X to the fund accountability statement, and this report does not affect our report
on the fund accountability statement dated (date of report).
We noted certain immaterial instances of noncompliance that we have reported to the management
of (name of recipient) in a separate letter dated August 15, 20XX.
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This report is intended for the information of (name of recipient) and the Millennium Challenge
Corporation (MCC). However, upon release by MCC, this report is a matter of public record and its
distribution is not limited.
Audit Firm's Signature
Date
Exclude this paragraph if there are no immaterial instances of noncompliance.
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Example 7.4 – Illustrative Report on Schedule of Computation of Indirect Cost Rate
Board of Directors
Name of Recipient Organization
Complete Mailing Address
Our audit was made for the purpose of forming an opinion on the basic financial statements taken as
a whole. The schedule of computation of indirect cost rate contained on page (x) is presented for
purposes of additional analysis and is not a required part of the basic financial statements. Such
information has been subjected to the auditing procedures applied in the audit of the basic financial
statements and, in our opinion, is fairly stated in all material respects in relation to the basic
financial statements taken as whole.
Audit Firm's Signature
Date
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Example 7.5 – Illustrative Unqualified Opinion on the General Purpose Financial Statements
of the Recipient Organization as a Whole
Independent Auditor's Report
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Board of Directors
Name of Recipient Organization
Complete Mailing Address
We have audited the accompanying balance sheet of (name of recipient) as of June 30, 20XX, and
the related statements of revenue and expenditures, and changes in fund balances for the year then
ended. These financial statements are the responsibility of (name of recipient) management. Our
responsibility is to express an opinion on these financial statements based on our audit.

We conducted our audit in accordance with (insert source of auditing standards). Those standards
require that we plan and perform the audit to obtain reasonable assurance about whether the
financial statements are free of material misstatement. An audit includes examining, on a test basis,
evidence supporting the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by the management, as well
as evaluating the overall financial statement presentation. We believe that our audit provides a
reasonable basis for our opinion.
In our opinion, the financial statements referred to above present fairly, in all material respects, the
financial position of (name of recipient) at June 30, 20XX, and the results of its operation and its
fund balances for the year then ended in conformity with generally accepted accounting principles.
Audit Firm's Signature
Date
For guidance on basic financial statement reports requiring other than an unqualified opinion, refer to SAS No. 58,
“Reports on Audited Financial Statements” and SAS No. 79, Amendment to SAS No. 58.
The auditors must express a qualified, adverse, or disclaimer of opinion when a lack of sufficient, competent evidential
matter or restrictions on the scope of the auditor’s examination have led him or her to conclude that an unqualified
opinion cannot be expressed.
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Example 7.6.A - Illustrative Auditor’s Report on the Cost-Sharing Schedule for Agreements
with Life-of-Project Cost-Sharing Budgets That Have Not Yet Ended, with No Reportable
Conditions Noted
Independent Auditor’s Review Report on the
Cost-Sharing Schedule
Board of Directors
Name of Recipient Organization
Complete Mailing Address

We have reviewed the accompanying cost-sharing schedule of (name of recipient) for the period
(date of beginning of current audit period) to (date of end of current audit period). Our review was
conducted in accordance with standards established by the American Institute of Certified Public
Accountants (AICPA).
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The purpose of our review was to determine if the cost-sharing schedule is
fairly presented in accordance with the basis of accounting described in note X to the cost-sharing
schedule. We also considered internal control related to the provision of and accounting for cost-
sharing contributions.
A review consists principally of inquiries of recipient personnel and analytical procedures applied to
financial data. It is substantially more limited in scope than an examination, the objective of which
is to express an opinion on the cost-sharing schedule. Accordingly, we do not express such an
opinion.
Based on our review, nothing came to our attention that caused us to believe that (name of recipient)
did not fairly present the cost-sharing schedule, in all material respects, in accordance with the basis
of accounting used to prepare the cost-sharing schedule.
This report is intended for the information of (name of recipient) and the Millennium Challenge
Corporation (MCC). However, upon release by MCC, this report is a matter of public record and its
distribution is not limited.
Audit Firm’s Signature
Date
For reporting guidance, see AICPA Statements of Standards for Attestation Engagements, Attestation Standard (AT)
100.64.
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Example 7.6.B - Illustrative Auditor’s Report on the Cost-Sharing Schedule for Agreements
with Life-of-Project Cost-Sharing Budgets That Have Not Yet Ended, with Reportable

Conditions Noted
Independent Auditor’s Review Report on the
Cost-Sharing Schedule
Board of Directors
Name of Recipient Organization
Complete Mailing Address
We have reviewed the accompanying cost-sharing schedule of (name of recipient) for the period (date of
beginning of current audit period) to (date of end of current audit period). Our review was conducted in
accordance with standards established by the American Institute of Certified Public Accountants (AICPA).
41
The purpose of our review was to determine if the cost-sharing schedule is fairly presented in accordance
with the basis of accounting described in note X to the cost-sharing schedule. We also considered internal
control related to the provision of and accounting for cost-sharing contributions.
A review consists principally of inquiries of recipient personnel and analytical procedures applied to financial
data. It is substantially more limited in scope than an examination, the objective of which is to express an
opinion on the cost-sharing schedule. Accordingly, we do not express such an opinion.
The results of our review disclosed the following material questioned costs as detailed in the cost-sharing
schedule: (1) $XXX in ineligible costs which were not fairly presented in accordance with the basis of
accounting used by the recipient to prepare the cost-sharing schedule, and (2) $XXX in unsupported costs
which were not fairly presented in accordance with the basis of accounting used by the recipient to prepare
the cost-sharing schedule.
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(Include paragraphs summarizing the internal control and compliance findings related to the cost-sharing
schedule with references to the findings in the reports on internal control and compliance, as applicable, as
well as the notes to the cost-sharing schedule.)
Based on our review, except as noted above, nothing came to our attention that caused us to believe that
(name of recipient) did not fairly present the cost-sharing schedule, in all material respects, in accordance
with the basis of accounting used to prepare the cost-sharing schedule.
This report is intended for the information of (name of recipient) and the Millennium Challenge Corporation
(MCC). However, upon release by MCC, this report is a matter of public record and its distribution is not

limited.
Audit Firm’s Signature
Date
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For reporting guidance, see AICPA Statements of Standards for Attestation Engagements, Attestation Standard (AT)
100.64.
42
This paragraph is illustrative only and can be modified or excluded based on the type of findings contained in the
report.
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Example 7.6.C - Illustrative Auditor’s Report on the Cost-Sharing Schedule for Close-Out
Audits of Agreements with Life-of-Project Cost-Sharing Budgets, and Audits of Agreements
with Annual Cost-Sharing Budgets, with No Reportable Conditions Noted
Independent Auditor’s Review Report on the
Cost-Sharing Schedule
Board of Directors
Name of Recipient Organization
Complete Mailing Address
We have reviewed the accompanying schedule of counterpart contributions of (name of recipient)
for the period (date of beginning of current audit period) to (date of end of current audit period).
Our review was conducted in accordance with standards established by the American Institute of
Certified Public Accountants (AICPA).
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The purpose of our review was to determine if the cost-
sharing schedule is fairly presented in accordance with the basis of accounting described in note X
to the cost-sharing schedule and to determine if cost-sharing contributions were provided in
accordance with the terms of the agreements. We also considered internal control related to the

provision of and accounting for cost-sharing contributions.
A review consists principally of inquiries of recipient personnel and analytical procedures applied to
financial data. It is substantially more limited in scope than an examination, the objective of which
is to express an opinion on the cost-sharing schedule. Accordingly, we do not express such an
opinion.
Based on our review, nothing came to our attention that caused us to believe that (name of recipient)
did not fairly present the cost-sharing schedule, in all material respects, in accordance with the basis
of accounting used to prepare the cost-sharing schedule. Furthermore, nothing came to our attention
that caused us to believe that the recipient has not provided and accounted for cost-sharing
contributions, in all material respects, in accordance with the terms of the agreements.
This report is intended for the information of (name of recipient) and the Millennium Challenge
Corporation (MCC). However, upon release by MCC, this report is a matter of public record and its
distribution is not limited.
Audit Firm’s Signature
Date
For reporting guidance, see AICPA Statements of Standards for Attestation Engagements, Attestation Standard (AT)
100.64.
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